Recommended proposal for NAB to acquire AXAs Australian and New - - PowerPoint PPT Presentation

17 December 2009

National Australia Bank Limited ABN 12 004 044 937

Recommended proposal for NAB to acquire AXA’s Australian and New Zealand businesses

2

Transaction summary

Acquisition of AXA’s Australian and New Zealand operations

• Australian and New Zealand wealth management and financial protection businesses

(including Australian mature business)

• Aligned advice businesses; IPAC, Genesys, AXA Financial Planning, Charter

Financial Planning

• 50% stake in AllianceBernstein Australia Limited
• Acquired businesses will be transitioned to the MLC brand in Australia and BNZ in

New Zealand

Transaction expected to be voted on by AXA AP shareholders at Scheme

meeting in the second quarter of 2010

Subject to regulatory approval, completion of due diligence, agreement by

AXA SA etc

Expected completion during the second quarter of 2010 Attractive pricing

• Cash consideration of A$4,610m
• Price to Embedded Value (P/EV) of 1.4x
• Price to 2010 broker consensus earnings multiple of 19.5x
• Significant synergy opportunity from combining AXA AP with MLC and recently

acquired Aviva and JBWere businesses

• EPS broadly neutral in second full year (excluding integration costs)

Business to be acquired Consideration Timing

3

Portfolio

Key Businesses

Business/

Corporate (Aust)

Institutional Wealth

(Aust)

Insurance (Aust) Markets Retail (Aust) Investments/

superannuation

Asset

Management

Private Wealth

(Aust) Strong position, with growth

• pportunity

Significant upside from continuing reinvention

BNZ (NZ) GWB (US) Asia CYB (UK) nabCapital – (non

franchise activity) Smaller businesses, resilient in tough conditions Unsatisfactory returns today in tough conditions Focus in Australia Maintain value, innovation &

• ptions internationally

Restructure nabCapital

150 new business bankers in 2009; 200 in 2010

4

Strategic rationale

Builds a market leadership position in wealth management to match our market

leadership position in business banking and create a positive differentiation for NAB

Brings NZ position to complement BNZ franchise Leverages MLC’s clear leadership on customer advocacy and transparency Builds high quality, scalable business able to be sector leading Sensibly priced deal reflecting point in cycle and multiple paths to value creation

5

Overview of business acquired

AXA Australia and New Zealand Wealth management

Fourth largest adviser

network in Australia (~1,600 advisers); 400 NZ planners

Top ten position in retail

superannuation and retail funds management (excluding CMTs)

Investment management

joint venture with Alliance

Bernstein Financial protection

Australian Business mix -

individual lump sum (44%), income protection (30%), group life (26%)

Individual risk market

share of ~9%

Mature

Long term savings

products continuing to attract inflows

Long term group risk

product currently in run-

• ff

FUM of A$48bn1/NZ$7bn Inforce annual premiums of A$666m/NZ$179m FUM of A$11bn More than one million customers

Source: AXA Asia Pacific New Business and Fund Flows announcement for the 9 months to September 2009 Note 1 – Includes AllianceBernstein FUM

6

Inforce Premium and FUM

Total inforce = A$1,262m¹ Total inforce = A$1,908m NAB Wealth/AXA Australia NAB Wealth/AXA Australia NAB/AXA Australia (A$m) NAB/AXA Australia (A$m)

Insurance business mix by inforce annual premiums1 Insurance business mix by inforce annual premiums1

680 339 243 297 194 155

Individual risk lump sum Individual risk income Group risk

NAB Wealth AXA Australia

FUM = A$74bn¹ FUM = A$102bn NAB Wealth NAB Wealth NAB Wealth/AXA Australia NAB Wealth/AXA Australia NAB/AXA Australia (A$bn) NAB/AXA Australia (A$bn)

Wealth management business mix by FUM2 Wealth management business mix by FUM2

45 15 13 13 8 6

Retail superannuation and rollovers Unit trust and investment Retirement income

NAB Wealth AXA Australia ¹ Dexx&R Detailed Risk Statistics (inforce premiums), September 2009; includes Aviva

2 Plan for Life Market Dynamic Report, September 2009; (retail products); includes Aviva

Retirement income 18% Retail superannuation and rollovers 61% Unit trust and investment 20% Other 1% Other 1% Unit trust and investment 22% Retirement income 19% Retail superannuation and rollovers 58% Income protection 28% Individual lump sum 51% Group risk 21% Income protection 27% Individual lump sum 54% Group risk 19%

NAB Wealth NAB Wealth C O M B I N E D B U S I N E S S O V E R V I E W

7

Strong market position

25.1% 19.3% 17.8% 13.6% 10.4% 9.5% 6.1% 5.8% 5.6% NAB/ MLC/ Aviva & AXA NAB/MLC/Aviva AMP CBA/Colonial WBC/BT ANZ/ING Mercer AXA IOOF Source: Plan for Life (Jun 09); Dexx&R (Individual Risk) 19.4% 17.1% 13.2% 11.4% 10.2% 9.3% 6.2% 6.1% 4.9% 4.4% NAB/ MLC/ Aviva & AXA CBA/Colonial NAB/MLC/Aviva AMP WBC/BT ANZ/ING AXA IOOF Challenger Macquarie 21.3% 15.5% 13.6% 12.3% 11.2% 8.4% 5.8% 5.3% 5.0% 3.3% NAB/ MLC/ Aviva & AXA NAB/MLC/Aviva CBA/Colonial AMP WBC/BT ANZ/ING AXA IOOF Macquarie Mercer 28.3% 19.1% 15.1% 11.3% 10.9% 9.9% 9.2% 7.5% 6.8% 3.4% NAB/ MLC/ Aviva & AXA NAB/MLC/Aviva CBA/Colonial ANZ/ING AMP Tower AXA Asteron WBC/BT Zurich

Market Share – Australian retail superannuation Market Share – Australian retirement income Market Share – Retail managed funds Market Share – Individual risk

8

Leading advice footprint across key segments

WBC / SGB 6% Colonial 7% ANZ/ING 9% AMP 10% AXA 10% Other 49% NAB/MLC 10%

Advice Coverage by Customer Segment Mass Affluent & Accumulators HNW

Aligned Salaried

Financial Planning

Financial Planning

Combined entity 20% Total number of Australian financial planners1

Financial Planning

EFA relationships Aviva – ~4,300 AXA – ~6,500 in Australia; ~1,000 in NZ charter financial planning

Source: 1 – NAB estimates; AXA AP June results; AMP offer presentation (9 November 2009); Top 100 Dealer Group Survey June 2009 500 1000 1500 2000 2500 3000 3500 MLC/AXA AMP MLC AXA PIS ANZ CBA BT Count

Salaried/Aligned Planners by Competitor1

9

Synergies

Opportunity to extract cost savings worth $210 million pre-tax p.a. by year five Integration will occur in a phased and considered way

• Consolidate corporate office and support functions
• Insurance and investment platforms in conjunction with Aviva integration

Review of NAB Wealth and AXA businesses will provide an additional opportunity to

rationalise and re-prioritise investment spend

Preliminary net-revenue opportunities of $50 million pre-tax p.a. by year five

including:

• Transition of cash management and margin lending to NAB
• Revenue synergies will be taken in asset management where appropriate
• Accelerate growth of North product through NAB advice channels
• Improved AXA advisor productivity

Key areas of focus are elimination of duplicate support in corporate functions,

product rationalisation and system integration.

• Preliminary cost estimate of $400 million pre-tax over 5 years

1 Fully phased basis. Current year dollars.

Total synergies of $260 million pre tax p.a. by year five¹ Cost synergies Revenue synergies Revenue attrition Integration costs

Some revenue attrition is expected in both platforms and insurance businesses

• Anticipated to be modest due to the broad alignment of distribution

philosophies (e.g. fee for service) and a focus on advisor retention

• Limited attrition experienced to date following Aviva acquisition

10

Acquisition rationale

Accretive deal with value upside

• Valuation underpinned by Embedded Value of $3,235 million1
• EPS broadly neutral in second full year (excluding transaction and

integration costs)

• Cost and revenue synergies upside potential

Existing Aviva and JBWere integration provides recent experience base for

the Gemstone integration

Phasing of integration activity currently being planned

Financial Integration Strategic

Transformational opportunity for NAB Wealth to establish a clear market leadership position in both wealth management and financial protection In a changing operating environment, provides NAB with additional scale

in life insurance and investments

Expanded advice reach in Australia Substantial opportunity to capture cost and revenue synergies Expanded presence in direct asset management Accelerates NAB’s NZ Wealth Management strategy Strengthens technology and product capabilities to enhance our customer

and adviser experience and product innovation

1 Source: AXA AP 1H09 Investor Compendium

11

Changing operating environment validates NAB’s strategic imperatives

Potential regulatory changes

Cooper review likely to result in advantage for scale players Ripoll review targeting

• Industry commission structure
• Fiduciary duty for planners
• Broaden access to financial advice

Competition

Heightened pace of consolidation

Strategic imperatives

Consumer confidence shaken by investment market performance

and collapses

Increasing product complexity Ageing population seeking more solutions to longevity risk

Consumer pressures

Trusted advice brand Strong governance Scale Financial strength

=

12

Integration plan

Years 1-2: Headcount reduction Eliminating duplication Scaling back office functions Years 3-4: Systems/ product rationalisation Systems improvements and convergence Product rationalisation

Integration Phasing

Aviva integration is progressing well. We have capacity for the Gemstone integration which will be implemented in a phased and considered way

Aviva integration currently ahead of timetable Outcomes expected to exceed original business valuation:

• Higher expense synergies
• Unplanned volume expense benefits
• Higher revenue synergies
• Significantly better retention of

Insurance sales

• Lower implementation costs
• Normal levels of employee attrition

(marginal increase in distribution)

• Good employee engagement
• Aviva Insurance sales at record levels;

Navigator sales at pre-acquisition levels

Aviva integration well progressed

13

Attractive financial metrics

Broadly neutral 19.5x 237 2010E (broker consensus) NPAT 3.0x 1,515 Net tangible assets 1.4x 3,235 1H09 Embedded value 1 4,610 Consideration paid Price to: Metrics Acquisition metrics EPS impact

1 Source: AXA AP 1H09 Investor Compendium

14

Funding

Consideration for acquisition of AXA Australia and New Zealand will be

A$4,610m, payable in the form of cash or a combination of NAB shares and cash at the election of AXA shareholders

• Flexibility and certainty for AXA’s shareholders

Consideration will be raised via a combination of a pro-rata equity

raising of approximately $1.5bn, the scrip offer and existing capital resources

The equity raising will be undertaken upon completion of due diligence

and once binding documentation has been executed, at which point the Tier 1 capital requirement is expected to crystallise

Funding Total consideration of A$4,610m for AXA ANZ

15

Capital

Total acquisition price of A$4,610m

• Net tangible assets of A$1,515m (ungeared)
• Goodwill of A$3,095m
• Total Tier 1 requirement before capital raising of A$3,853m

Post completion Tier 1 ratio provides continued balance sheet strength and capital flexibility

Overview

1 As presented in the ASX announcement dated 28 Oct 2009. Based on the Tier 1 capital number as at 30 Sep 2009 and does not reflect movements in capital subsequent to that date. 2 Deduction of goodwill

and 50% NTA from Tier 1 (A$3,095mm goodwill and A$1,515mm NTA). 3 A$1.5bn renounceable entitlements offer. 4 Allowable Tier 1 hybrid funding reduced by A$862m due to the reduced fundamental Tier 1 (goodwill and NTA deduction) and increased by A$500m due to the A$1.5bn rights issue

Deduct 50% NTA2 Equity raising A$1.5bn3 Net hybrid capital impact4 Pro-forma at completion

8.17% 8.96%

(0.90)% (0.22)% 6.00 6.25 6.50 6.75 7.00 7.25 7.50 7.75 8.00 8.25 8.50 8.75 9.00

Sep 091 Deduct goodwill2

(0.10)%

Strong capital position maintained

0.44%

Tier 1 capital impact

8.94%

50% cash acceptances 100% cash acceptances

16

Contacts

Disclaimer: This document is general background information about the Group’s acquisition of AXA current at the date 17 December 2009. It is information in a summary form and does not purport to be complete. It is not intended to be relied upon as advice to investors or potential investors and does not take into account the investment objectives, financial situation or needs of any particular investor. These should be considered, with or without professional advice, when deciding if an investment is appropriate. This announcement contains certain "forward-looking statements". The words "anticipate", "believe", "expect", "project", "forecast", "estimate", “outlook”, “upside”, "likely", "intend", "should", "could", "may", "target", "plan“ and

• ther similar expressions are intended to identify forward-looking statements. Indications of, and guidance on, future

earnings and financial position and performance are also forward-looking statements. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors, many of which are beyond the control of the Group, that may cause actual results to differ materially from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements.

Note:. This announcement does not constitute an offer to sell, or a solicitation of an offer to buy shares in the

United States, or to any person that is, or is acting for the account or benefit of, any "U.S. person" (as defined in Regulation S under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act") ("U.S. Person")). The shares referred to herein have not been, and will not be, registered under the U.S. Securities Act and may not be

• ffered or sold in the United States or to, or for the account or benefit of, U.S. Persons unless the shares are

registered under the U.S. Securities Act or an exemption from the registration requirements of the U.S. Securities Act is available.

Media Investor Relations Lyndal Kennedy Mobile | +61 (0) 400 983 036 Craig Horlin Mobile | +61 (0) 417 372 474 George Wright Mobile | +61 (0) 419 556 616 Brandon Phillips Mobile | +61 (0) 417 226 180